Venture Capital Firms Statesboro GA

Local resource for venture capital firms in Statesboro. Includes detailed information on local businesses that provide access to venture capital funds, startup business loans, venture capital consultants, and venture capitalists, as well as advice and content on venture capital investment.

Attract more Venture Capital by Avoiding Angel Round Conflict

by Mike Sage

The use of friends, business associates and Angels as sources of financing often appears attractive as a relatively uncomplicated, readily available capital source. For startups, they are often the only form of capital available. Yet, care must be taken to ensure that this early round of capital does not interfere with long-term financing.

Angel financing is typically a one-time source, in which the investors have unrealistic return expectations. Typically, these sources are not professional investors with diversified and balanced portfolios. They can hardly be blamed for nervousness over the inevitable ups and downs of the your company's development cycle; however, as friends or previously successful entrepreneurs themselves, you can be sure that they will make their advice and concerns well known to the company. Part of the problem some of you encounter is that you tend to over-value the company for the Angel round. Then you are placed in the uncomfortable position of explaining to people who often do not understand venture capital that they have to take what they would consider to be a valuation "haircut."

We've encountered entrepreneurs that say, "We've just raised a $10 million pre-money valuation, and now we're going to go out and get a $15 million valuation." Then we learn they only raised $500,000 at the $10 million pre-money valuation. That's not a solid basis for a $10 million pre-money valuation. Yet there are some of you who mistakenly believe it is a solid valuation and potentially put the company in jeopardy to fail in the next financial round.

Angel Round Strategy

Here's one option to consider when trying to value your company for a seed-round investment. Avoid it altogether; after all, it doesn't make sense and can only present a potential liability down the road. Instead of offering equity, offer debt that can be converted into equity at some point in the future. This is a much more secure financial instrument, which will provide a lien on the assets to the Angels if the business does not progress. The lien would be released upon a debt-to-equity conversion that could take place at the first round of a venture capital investment. The conversion price can based on the pre-money value paid by a VC, adjusted with a discount based on how much time passes until conversion.

For example, let's assume that an Angel investor group provides a convertible loan in the amount of $1,000,000, and one year l...

What Venture Capitalists Really Want

By Marc J. Lane

After years of free-spending excess, venture capitalists are revealing a new, back-to-basics attitude that's healthy for the venture-capital (VC) industry, and even healthier for the cash-strapped entrepreneurs it supports.

No longer can venture capitalists throw a few bucks at a start-up, and confidently wait for the IPO. And that unavoidable reality continues to dampen venture capitalists' enthusiasm for new deals. By some accounts, VC investment dropped another 25% in the third quarter from the second this year, and most of that investment represents follow-on funding.

But venture capitalists remain on the prowl. Although tempered by the flat-lining of the dot-com sector, they still can be coaxed to take equity stakes in technology-focused, high-growth entrepreneurial companies. And with prevailing interest rates lower than they've been in most venture capitalists' lifetimes, they're still hungry for higher risk-adjusted returns.

The difference is that now they care about quality more than they ever did before.

Goodbye, Flipper With the stock market struggling to regain its bearings, the price of getting into a deal has dropped by two-thirds. So, for the first time, venture capitalists can look at high-quality opportunities at fair -- even low -- prices.

They need to. When VC investments were made at unjustifiable valuations, the strategy was to count on a quick flip at an obscene profit. Now they know that the greater fool theory doesn't work forever, and the rule of reason needs to be reckoned with.

An unacceptable number of business failures and a toughening economy have coalesced to force venture capitalists to rethink their business models. From now on, they'll be more cautious and settle for nothing less than senior preferred stock in the companies they fund. They'll set higher reserves. And they'll budget more money to stay committed to a deal for the long-term.

They'll also demand more of entrepreneurs who are seeking capital. And the things they'll demand will prove to benefit entrepreneurs enormously.

Venture capitalists just won't be interested anymore if entrepreneurs can't clearly justify the financing they're after and exactly how it's going to be used. And venture capitalists simply won't but money at risk unless a strong, credible management team runs the target company and can sell realistic revenue projections and conservative burn rates.

A Flair for the Old-Fashioned Some entrepreneurs will look at themselves and candidly conclude that their firms can't qualify or that venture capital isn't worth the effort. And the truth is that most companies are better off without it.

Many successful entrepreneurs have bootstrapped themselves to enormous profitability, plodding along the old-fashioned way. They max out their credit cards, tap family and friends, forgo big salaries, and accept slower growth rates. And they're perfectly content to do so.

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